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When does an interest-bearing account make sense? Often, these accounts are a good option when you want to earn a little something for letting the bank hold your money, often when saving for a big event.

INTEREST-BEARING ACCOUNTS EXPLAINED

Simply put, these accounts are bank accounts where you can earn interest while keeping your money safe. Depending on your balance, a bank will pay you interest. If you are considering this type of account, it is important to factor in your goals before determining which one is best for you. Here are some of the popular types of interest-bearing accounts explained.

SAVINGS ACCOUNTS

Most people think of this type of account when considering an interest-bearing account. These accounts typically allow you to link savings and checking accounts, which makes moving money simple. They are also a good option for emergency funds since money is usually easy to access. A potential negative, however, is that savings accounts tend to pay meager interest rates.

HIGH-YIELD SAVINGS ACCOUNTS

A high-yield savings account may be a good option if you are hoping for higher interest rates than are generally offered via a traditional savings account. These accounts typically do not have physical buildings but are provided mainly through online banking and can pay their customers higher rates. Although transferring money is still an option, it may take a little longer than a traditional savings account, which may be an important consideration.

CERTIFICATES OF DEPOSIT (CDs)

If you are comfortable not being able to access your money for a certain period, a CD offers payment at a fixed rate of return in interest, often higher the longer you keep your money in the CD.

MONEY MARKET ACCOUNTS (MMA)

A money market account mixes savings and a checking account, typically with a larger minimum deposit. Some pros, however, include the ability to write checks and the ability to use a debit card. They tend to have higher interest rates than savings accounts, but you may not have access to unlimited numbers of withdrawals in a given month.

NEXT STEPS TO CONSIDER

Before moving forward with any interest-bearing account, you will want to consider any fees associated with the account. Also, ensure you know the requirements, such as required balances and withdrawal limitations, to make the best choice based on your needs.